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Jefferies downgraded Mitie Group (LON:MTO) PLC (OTC:MITFY) to Hold from Buy on Friday, setting a price target of GBP1.45 following the company’s recent acquisition announcement.
The downgrade comes after Mitie shares gained approximately 30% year-to-date, now trading at 11 times earnings. Jefferies cited the company’s "sizable Marlowe deal" as marking a significant shift away from its previous investment thesis.
In February, Jefferies had maintained a bullish stance on Mitie Group based on what it called "disciplined delivery" combining organic growth, share buyback accretion, and continued bolt-on acquisitions. During that period, the stock traded at 9 times earnings within an 8-12 times range.
The market subsequently rewarded Mitie through April and May as shares re-rated to 12 times earnings. However, the research firm now views the Marlowe acquisition as presenting "mixed financial metrics" while also noting the company has suspended its share buyback program.
With the stock’s significant year-to-date appreciation and current valuation, Jefferies sees "insufficient upside to remain buyers" of Mitie Group shares, prompting the downgrade to Hold from its previous Buy rating.
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